Small businesses are considered the backbone of the economy, particularly as half the people who work in this country own or work for a small business.

But America’s policies surrounding small businesses are in dire need of reform, according to a recent Harvard Business School (HBS) report on competitiveness.

Professor Karen Mills, who was a member of President Barack Obama’s cabinet running the Small Business Administration (SBA), explained that in order to make America more competitive, leaders need to focus on small business.

“What drives our economy? What drives innovation? Really our entrepreneurs. So if we don’t have all our entrepreneurs working, creating jobs, our economy won’t be as vibrant as it needs to be, and in some ways that’s one of the things we’re worried about right now,” Mills said.

Mills explained that she sees promise in Hillary Clinton’s recently unveiled small business plan, which aims to tackle some of the gravest inequities between big corporations and smaller operations.

A path to the middle-class

While venture-backed companies have been able to thrive in this economy—with tech behemoth Facebook (FB) being the most high-profile example of success—the majority of small businesses are struggling, according to Mills.

After all, not all small businesses are the same.

“On the one hand, entrepreneurs at the higher end, the high tech companies, the venture-backed companies, are thriving, and on the other hand, the rate of entrepreneurship in this country is going down,” Mills explained.

The challenge to build the middle class falls largely on small business creation, she added.

“Entrepreneurship absolutely is a path to the middle class,” Mills said. “It’s traditionally been the American dream….Now, half the people in this country don’t believe the American dream is available to them. And that’s partly related, we think, to this decline in the rate of startups.”

One key solution, explained Mills, is the availability of capital—not just for the venture startups in Silicon Valley but for the smart ideas in Iowa and in South Carolina and Mississippi.

“If we don’t have what we call an inclusive view of entrepreneurship, women, minority-owned businesses, different geographies, we’re not going to get all of our new startups and all of our entrepreneurs to contribute, and we won’t have the economy and the growth that we need,” Mills explained.

For more on the HBS Competitiveness study, please see below:

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